Alberto YELMO BRAVO
3. Las decisiones de la AMA y el COI tras los informes de la co misión independiente
membership (Component 2)
I postulate that social viewpoints on institutions in general and on MFIs in particular gain weight when the HH respondents of the sample explicitly perceive them as important. Important here basically means that the HH respondents might let their own opinions be
influenced by those of the other actors in their communal milieus.5 Communal and social ties are vital networks for individuals and families, and offer a last resort in difficult times. These strong social ties require constant care, maintenance and cultivation for harmonious communal interactions. Neglecting or disregarding the opinions of communal actors on private or public decisions of possible interest to others in the community can endanger the social fabric of the community. Thus, to be well integrated and accepted within the community, most members of the community give in and comply with the social and communal norms that dictate the rules of the game in society (cf. Chapters 2 and 3).
Table 4.3 presents survey responses on the importance of social institutions and actors, the first component in the decision-making process to take up a loan. For many of the respondents, from both the sample groups, their social ties and the acceptance of peers and kin within their communities seemed to play a very important role. In addition biradari –
caste-based or tribal kinship groups or extended lineages – seemed to occupy a vital space in the lives of community members (see Appendix 7 for a more detailed discussion of the
biradari). As pointed out in the category of religious and community groups, almost four
fifths of the respondents noted them as either important or very important in the daily lives of their HHs. Predominantly MFIs were regarded either as important or very important for the provision of affordable credit services by many of the respondents. Nonetheless, the difference in the two sample means (borrower and non-borrower HHs) is shown to be highly significant.
5Wherever necessary, the term “important” has been further qualified to encompass other meanings too, like in the case of MFIs and moneylenders as “service providers”. During the interviews this term was clearly explained to all the respondents and their answers accordingly noted.
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Table 4.3: Component 1: viewpoints on the importance of MFIs & other actors
1. The p-value refers to a t-test of the difference in the means for borrower HHs – non-borrower HHs); *p<0.1, **p<0.05 and ***p<0.01 (two-tailed)
In addition, we observe large differences of opinion within the control group. Almost all women respondents from the control group ranked the MFIs as either important or very important, while most of the men from the same category found MFIs not important or redundant. The respondents who found MFIs to be important or very important were of the opinion that the terms of the loan (i.e., interest rates, smaller monthly instalments and the ease with which the loan was serviced) were much better suited to their needs than alternative credit sources (e.g., moneylenders). Many respondents from the borrower HHs said that the loan provided much-needed capital, enabling economic activities that would otherwise not have been realised.
During interviews it was revealed that most of the men from non-borrower HHs, considered borrowing in general as something that should be shunned, and that they personally would be willing to do so only under conditions with absolutely no other alternatives. This sentiment was best conveyed in a statement by a respondent from UP:
“Borrowing is a curse.... once you cannot pay back, then the little respect that we poor have is also taken from us. I would rather sleep hungry, than borrow or allow a member of my family to do so” (interview with male non-borrower,
Sitapur, UP).
Borrower HHs Control Group Total Difference in sample means
(p-value of t-test)1
N 39 35 16 13 103
Reported by women men women men -
Opinion on the importance of religious and community groups
Not important Important Very important 1 29 7 8 17 6 0 12 4 3 7 2 12 65 19 0.048 (0.70)
Opinion on the importance of MFIs for services
Not important Important Very important
Important but should be avoided
0 12 26 0 2 21 11 1 1 9 5 0 8 3 1 1 11 45 43 2 -0.48 *** (0.00)
Opinion on the importance of moneylenders as service providers
Not important Important Very important
Important but should be avoided
7 6 0 24 5 7 1 20 0 5 0 11 0 4 1 6 12 22 2 61 0.19 (0.45)
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Elaborating on this comment, the respondent explained that moneylenders and loan officers of MFIs show “little or no mercy” when they want to collect their loan. Poor borrowers who do not have the money to pay when a loan comes due suffer shame and are ostracised from their communities for improper conduct (that is, taking out a loan and not repaying it). This fear of ostracism for non-conformity to proper conduct, losing face among peers in case of non-repayment, seemed to deter many from borrowing from an MFI. As heads of their households, the men were probably the deciding authority in the family regarding loan take up. This suggests that the perceptions of men may have an effect on whether the women opt for a loan or not.
For the second component, it is important to note that actors’ opinions of MFIs are assessed indirectly. The survey measures the respondents’ (both borrowers and non- borrowers) views on the opinion of these actors. It is possible that the same actor’s opinion could be judged or construed differently by different HHs or respondents. Table 4.4 presents the general sentiments on MFIs (as perceived by the HH respondents) from the various actors within their communities, which forms the basis for the second component of decision making on whether to opt for a loan. Now except for the religious community’s foreman and the local politicians, Table 4.4 clearly demonstrates the statistically highly significant differences between the sample means for all other actors MFIs (as perceived by survey respondents within the HHs). Actors who differ in their perceived opinions on MFIs between the sample means include first and foremost the male head of the household, the family (both immediate and extended), but also the community or caste chief, neighbours and peers within the community and the local moneylenders. Unlike the men from borrower HHs, very few men from the control group would approve of MFI membership of the HH’s women. Concurrently, control group female respondents reported a much higher opposition from husbands or male guardians than from any other actors like the immediate and extended family, the community headmen, neighbours and peers and the local moneylenders concerning MFI membership than did borrower HHs.
The relevance of how much the first component (personal standpoint on the relevance of MFIs and other actors) might be influenced by the second component (perceived opinions of other actors)6 can perhaps be best demonstrated from the statement of a control group respondent from Bihar:
6 This includes the opinions of men within the HHs. Though the opinions of the men within the HHs have a
stronger weight, nonetheless men’s opinions are also subject to influence and pressures from their larger familial
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“...[generally] we poor people are easily intimidated ....so when the extended family or biradari [social kinship sub-classes along castes lines] think that women should rather look into household matters and not waste time with such
[all SHG related work to microfinance] activities, then we have to agree”
(interview with male non-borrower, Bihar).
Table 4.4: Component 2: General viewpoint on MFIs (as presumed by the respondents) of various actors
1. The p-value refers to a t-test of the difference in the means for borrower HHs – non-borrower HHs); *p<0.1, **p<0.05 and ***p<0.01 (two-tailed).
2. See Appendix 7 for a definition.
Borrower HHs Control Group Difference in sample means
(p-value of t-test)1
N 39 35 16 13
Reported by women men women men
Husband/ male guardian (would) approve(s)
of MFI membership 34 32 1 1 -0.84 *** (0.00)
Immediate family (would) approve(s) of MFIs
32 20 3 3 1.10 ***
(0.00)
Extended family’s opinion of MFI
membership Positive Indifferent Negative 18 13 8 12 19 2 3 5 8 2 5 5 1.10 *** (0.00)
Community or Caste chief/ headman’s 2 opinion of MFIs Positive Indifferent Negative 20 13 5 17 12 4 5 4 7 4 2 6 0.53 *** (0.00)
Neighbours’/ peers’ stand on MFI
membership Positive Indifferent Negative 23 11 5 18 12 3 4 4 8 3 4 5 0.67 *** (0.00)
Religious community/ foreman’s opinion of
MFI membership Positive Indifferent Negative 16 17 5 11 16 6 4 9 3 4 6 2 0.11 (0.44)
Local politicians/ Feudal lords opinion of MFI membership Positive Indifferent Negative 10 24 5 6 23 4 4 12 0 3 8 1 -0.11 (0.35)
Local moneylenders/ traders opinion of MFI membership Positive Indifferent Negative 7 11 21 4 7 22 0 3 12 0 0 12 0.44 *** (0.00)
Government employees opinion of MFI membership Positive Indifferent Negative 0 36 0 0 32 0 0 16 0 0 12 0 -
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The statement possibly illustrates two important things. First, the lower economic (and potentially social) standing of the HH is one reason why HHs might be intimidated into compliance by their biradari. Second, it is quite possible that the male head of the HH
compensates for this relatively weak position within his society by imposing his authority upon his female counterpart within the HH, where his authority might not be questioned. Contrastingly compare the statement of this respondent from UP:
“I faced a lot of opposition from my family and clan members initially over my
wife’s membership with NEED, however, my wife kept assuring me that our embroidery business will benefit from the loan and we would have more work...which finally made me to stand up against all the others and allow my wife to opt for [MFI/ NEED] membership”, (interview with male borrower,
Sitapur, UP).
Comparing the latter statement with the former, it is clear that the support and consent of the male guardian is the critical influence on loan take up, even when there is opposition from the wider family and social circles. However, it is important that the male guardian feels secure and is assured that his male authority within the HH will not be challenged.
From the interviews there was a clear pattern in many of the borrower HH’s familial and societal surroundings. Most of the borrower HHs who had been with NEED for over a year had in fact seen an improvement or a change in the opinions of the people regarding MFIs within their social circles over time. In any case, the figures and statements seem to suggest that for the borrower HHs of the sample, most of the actors within their immediate circles either approve of MFI membership and assume a positive stance on MFIs, or at worst are indifferent to them.7 According to all HH respondents in all samples, these actors are linked by important social ties to HHs and their families. Therefore it is quite probable that HH opinion would be subject to influence from them regarding MFI loan take up if and when there is a need for one.
Regarding moneylenders, a majority of all respondents, regardless of status or gender, reported that though their services were important they nevertheless “should be avoided” (Table 4.3). The reason is that in emergencies they are the only source of guaranteed and speedy cash, even if on exorbitant and exploitative terms, as one respondent commented:
“.... [moneylenders] offer a service which is unmatched by any other [credit
servicing agency]....one can be in need of money in the middle of the night or for
7 As mentioned with the exception of the religious community’s foreman and the local politicians from among the actors.
98 any reason, the moneylender will provide you with credit without questions asked...even if it is expensive, those in need are indifferent to the conditions at that point in time” (interview with male borrower, Lucknow, UP).
This suggests that the moneylenders were serving a wider market of borrowers who do not all qualify for MFI loans. This renders moneylenders important service providers for cash when other alternatives are not an option. One moneylender from Sitapur, who had multiple businesses running, owned much land and was a local politician and a moneylender all at the same time said:
“...I [am] forced to lend money when people come to me in times of need....no one else would lend to them” (interview with moneylender, Sitapur, UP).
Many of the HH respondents of the survey had similar sentiments which are best reflected in the following statement made by one of the NEED branch managers:
“...[moneylenders] serve a market that MFIs might never cater to, as they will lend right away, for any purpose and at all hours....because then they also know that they can use all means to extract their money....without any regard to borrowers condition”, (interview with development manager, Sitapur, UP).
While this suggests that there is no competition between the moneylenders and MFIs, rural moneylenders might still be indignant if MFIs take the most desirable clients. There is more at stake in the stance of the moneylenders towards the MFIs than just direct lending competition. For example, MFI loans usually also serve as a source to pay back loans from moneylenders on time. By breaking the cycle of continual indebtedness, this threatens to bring the moneylenders’ stranglehold over their clients to an end. This issue will be discussed in more detail in the next section, which examines the actions of actors towards MFI staff and clients in more detail. Moneylenders benefit from their clients not only from the interest on their loans, but also in other ways. This was explained by another moneylender in Sitapur, with the largest loan portfolio of all the moneylenders interviewed, who was also a powerful and rich landowner:
“....since these MFIs turned up, I cannot be selective in lending to the people who come to me. I charge interest from those who can afford it and those who
can’t, have to work on my lands for a maximum of 50,-INR [0.91 USD] a day until the money is worked off...I am still at the losing end as those who come to me are not the most able bodied [to later work off the loan on his land]”
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According to the NEED manager, the moneylender charged a minimum of ten percent interest rate on a monthly basis (effective interest rate of 120% annually) for loans. In most cases borrowers were unable to pay this back and had to work on the moneylender’s fields longer to account for the principal plus interest on their loans. Their daily labour was counted against the loan at half the rate of what he would have paid a normal, non-indebted labourer.8
The wages that this moneylender was paying for the labour on his land was far below the market rate. Yet the moneylender expressed his displeasure at the “quality” of the labour acquired like this. According to him, usually “better quality” labourers were not reliant on him for work or loans as they had other sources for credit (MFIs) and/or work.9 NEED had failed to establish any lending activities in the village of this particular moneylender, according to the NEED manager; an effort years earlier failed miserably. This was mostly because the village inhabitants had avoided taking out loans due to the moneylender’s wrath, but also because the clients were not disciplined enough in their regular meetings or instalment payments. After an initial pilot phase, NEED had wrapped up its activities in the village, leaving the moneylender as the only source of credit for the villagers. It was not clear, however, whether the moneylender had directly threatened the people of the area to discourage them from taking out loans. In this particular case, none of the villagers were willing to say anything about the moneylender even when asked explicitly.10 In addition, there were no other MFIs in the village, so that no comparisons could be made. However the moneylender’s open views on MFIs and the uneasiness of the villagers to comment on the moneylender/landlord is an interesting indicator in itself, keeping in mind that any alternative sources of credit from MFIs was most probably an unwelcome option for the moneylender. My interpretation of the situation was that the moneylender had the benefit of living in and among the community, and that this gave him an added advantage of exercising more pressure on his clients than could the MFIs. Moreover, the moneylender had more freedom in using mechanisms of coercion to induce discipline with repayments. The MFIs, in contrast, could not exercise this option for ethical reasons.
Thus, the moneylender would be better off without any MFIs in his immediate or neighbouring vicinities, as the local populations would then be reliant upon him for loans. As
8 In comparison, the daily wage rates in agricultural occupations in rural India for 2009 ranged from 70 – 131,- INR (1.3 – 2.42 USD), depending on the type of agricultural work (ploughing, harvesting, sowing, weeding etc.) and gender (Ministry of Labour and Employment 2011).
9 Most MFI clients were also leasing land from loans for their own agricultural produce. This left them less reliant on work from large land owners on miserable terms.
10Note that none of the villagers from the moneylender’s village were part of the survey sample, as they were not current NEED borrowers. The additional efforts to probe the villagers with questions were simply to get more information on lending practices and options in the village.
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they would probably not be able to pay these off without other sources of lump sum cash, this situation would leave them only the option of supplying cheap labour, working the moneylender’s lands for wages well below market rates. Note also the respondent HH’s opinions on how moneylenders react to and think about MFIs in general, as depicted in table 4.4. Almost two thirds of all the respondents, regardless of borrowing status and gender, reported that moneylenders have a negative attitude toward MFIs, and that they openly demonstrate to their clients and indirectly threaten not to lend if clients go to MFIs. No other actors, whether part of a community, religious or a government representative group, were systematically reported by the HHs interviewed to have such negative opinions of MFIs. For the respondents, it was clear that once they opted for a loan from an MFI, they might no